The “Sun Belt” is a prime target for growth-oriented multifamily real estate investors. This super-sunny region of the country is comprised of 15 states throughout the Southeast and Southwest, and by some definitions, anywhere south of the 36th parallel. Almost 50% of the US population lives within these areas, and population growth within the Sun Belt far outpaces many other areas of the country, with the entire region expected to grow 55% by 2030. 

Much of the growth in the Sun Belt is being driven by high real estate prices and the high cost of living in coastal states and other expensive regions. Its relatively affordable real estate, combined with the rise of remote work, has contributed to the phenomenal growth in population, single and multifamily rents, and overall property values in the Sun Belt. The states in the Sun Belt tend to be more business friendly and generally more tolerant of housing growth, as there is more available land for growth and expansion throughout the region. So, the consistent loss of population in places like New York, New Jersey, Ohio, and Michigan, due largely to higher taxes and large cost of living increases in those areas, has been a boon for states like Tennessee, Georgia, Alabama, and North Carolina, where a steady increase in population for more than two decades has created the kind of economic momentum that will last for generations, positioning the Sun Belt region as the number one place to invest in multifamily for the foreseeable future. 

It shouldn’t be surprising that investors are flocking to the region- even investors who live nowhere near the Sun Belt. In this fast-growing region, it is crucial to work with local real estate brokers that understand the landscape of the Sun Belt region. 

A good understanding of the facts on the ground, new developments and neighborhoods, and pitfalls to avoid can be the difference maker between a successful investment or a money pit. Whether you’re selling a Sun Belt property or looking to invest, SVN | AVAT brokers have the knowledge, tools, experience and connections to achieve your Sun Belt multifamily goals. 

Sun Belt Market Highlights

According to data released by the US Census, 10 of the 15 fastest-growing cities in the country sit in the Sun Belt. Population growth in major southern cities has averaged almost 9.5% since 2010, compared to much lower numbers in the Northeast and Midwest- 1.8% and 3% respectively. Not only does more than 50% of the nation’s population currently call the Sun Belt home, but it’s also seeing a higher-than-average-in-migration rate- largely driven by some of the factors we mentioned above. 

The region also accounts for 31.5% of the nation’s housing pipeline- with roughly 280,500 units currently under construction. Rent growth trajectory in the Sun Belt grew at a steady clip in 2021, and is expected to continue well into 2022 and beyond. The lower cost of living in the Sun Belt is a significant driver of growth, attracting many different types of residents, including young families looking to make the most of their income as well as retirees on fixed incomes. 

Growth isn’t the only real estate-related plus offered by the Sun Belt. Other notable highlights for real estate investors include:

A Less Stringent Real Estate Regulatory Regime

Many states within the Sun Belt are more developer and landlord-friendly than coastal states when it comes to government regulations. It’s just going to be easier to develop and/or manage a multifamily property in Biloxi, Mississipi, or Chattanooga, Tennessee compared to San Francisco or Los Angeles. This includes tenant law- making it easier to evict problem tenants- as well as environmental and tax concerns. 

A Pro-Business Atmosphere

In a similar vein to the relaxed real estate regulations, many Sun Belt states offer fertile ground for business growth. Many have much lower income and property taxes compared to coastal states, helping to attract businesses to the area and creating high-value tenants for multifamily property owners. Paying less to the state each month for your real estate business is obviously also a major plus. 

Milder Climates Reduce Weather-Related Property Damage and Wear and Tear

While you’ll likely benefit from property depreciation on your yearly tax bill, you still want to purchase properties with limited wear and tear. Many states within the Sun Belt offer substantially milder climates than expensive coastal areas, helping to reduce the amount of money you spend on repairs and maintenance, and allowing you to pocket more of the depreciation costs you write off on your taxes. 

Top Performing Areas

Remember that the Sun Belt comprises a wide swath of the United States, over 15 different states- so it makes sense that some areas are going to be more conducive to multifamily investing than others. Cities like Nashville, Huntsville, Jacksonville, and the Raleigh/Durham area are leaders in the region, making up much of the multifamily growth in the area.

Additionally, according to the Urban Land Institute and PricewaterhouseCoopers’ annual ranking, Orlando, Miami, Atlanta, Tampa and Charlotte ranked in the top ten for markets to watch in 2022. These cities share many of the traits we’ve already covered, including a relatively low cost of living, a favorable real estate regime, lower taxes, and a willingness to embrace remote workers who are unable to find reasonably priced properties on the coasts. That’s why 7/10 of the fastest-growing cities in the country sit within the Sun Belt market.

Conclusion

The Sun Belt multifamily industry has a lot to offer investors, including healthy population growth, property appreciation, a wide pool of renters, and favorable government regulations and taxes. That doesn’t mean that every investment in the region is going to be a home run- details matter. But if you’re on the hunt for a reasonably priced multifamily property with long-term appreciation potential and steady cash flow- take a look at Huntsville or Chattanooga before you look at San Francisco or Boston. 

Headquartered in Huntsville, Alabama, SVN | AVAT Realty manages the sale of multifamily assets across the Southeast United States, including Alabama, Tennessee, Mississippi, North Carolina, Arkansas, Texas, and Georgia. With more than 12 years’ experience in the multifamily space, our industry expertise, national marketing platform and relationships with thousands of active buyers and financiers enables our team to provide superior value to our clients. Contact our team today to learn more.